Machinima: The Most Impressive LA Tech Company since MySpace

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Long California’s digital also-ran, Los Angeles may have its first bona fide new media hit brewing. It’s called Machinima, it did 2.3 billion video views last year, 350 million in December alone, has 45 million uniques, and is still growing.

These numbers slaughter more well known video companies, but if you haven’t heard of Machinima– don’t feel bad. I hadn’t either before a week ago, when I found myself camped out in Redpoint Ventures office and told partner Geoff Yang I wouldn’t leave without a good story tip. Finally he whispered, “Machinima’s December numbers” and I had to ask him to pronounce Machinima a few times, and spell it before I even knew what he was saying. I was impressed we even had a CrunchBase widget for it.

The word is mash-up of “machine” and “cinema” and refers to an underground trend of gamers recording their own videogame play and posting the videos online. It used to be limited to bragging– a hard core gamer showing off his skills. But increasingly, machinima has taken a more creative turn. Players have learned to manipulate story line and character within the video game worlds, with gamers playing characters, and one acting as the camera man. The company was started by Allen DeBevoise and has raised $15 million in two rounds of funding from MK Capital and Redpoint Ventures.

DeBevoise was drawn to the underground movement more from the animation side than the gamer side. He’s been in animation so long, he even worked on the first Tron movie. He was blown away that gamers were able to use these real time game engines to render the imagines in real time– a process that used to be expensive and slow. “Real time rendering was the hold grail in the traditional computer animation business,” he says.

He went to see a gamer who owned the URL in 2004 and bought it from him, although he didn’t focus much on the business until YouTube started to take off in 2007. He tried to raise money back then but the audience was seen as too niche, maybe 5 million people if Machinima was lucky. Clearly everyone underestimated what was brewing here.

There are a lot of fascinating cultural aspects to Machinima that helped make the audience so much bigger than anyone expected. It’s smack in the middle of the expansion of the geek-chic Comicon-culture. It’s never been a better time to be a geek, as seen with the rise of comic themed mega-movies, the explosion of digital movie making innovation in movies like Avatar and Tron that blur the line between actor and animation, everything JJ Abrams and even the mainstream popularity of shows like “The Big Bang Theory.”

While Machinima’s audience is more hardcore than your average Farmville user, platforms like Facebook and the iPad have certainly made the concept of being a “gamer” more mainstream than ever. Already Machinima is doing roughly 70 million views a month through mobile phones, and expects more off-computer as digital living room devices like GoogleTV and Apple TV take off. “Gamification” is even an overused Silicon Valley buzzword these days. And Machinima’s young users have grown up in a world of digital animation, from Pixar as a kid to Halo as a young adult to developing crushes on blue aliens as a 20-something. They’re the natural generation to create a new art form merging the two.

What I love about this company is how well it plays to LA’s endemic strengths, and doesn’t try to do what the Valley does well. Rather than be a tech-centric company, Machinima runs entirely on a YouTube channel. But that doesn’t mean it’s a lean, user-generated-content company. Machinima has 90 employees most of which produce 24 regular shows in house, that augment the ones from community “directors.” Given the creative talent in LA, you could argue this is a company that couldn’t have been built in the Valley. DeBevoise says he regularly meets with agents who see Machinima as a potential digital outlet for creative talent like animators, directors and writers, and since it’s a very new form of filmmaking there aren’t a lot of sacred cows it’s threatening.

DeBevoise isn’t into Machinima being the next, say, Facebook. He wants it to be the next iteration of Rolling Stone magazine or MTV–the touch-point for the pop culture zeitgeist for young people broadly, not just hardcore gamers. It’s a very LA-vision.

In 2010, Machinima’s advertisers were not surprisingly mostly gaming publishers, but given the numbers, this year the company is expanding into non-endemic mainstream consumer goods like Coke and Unilever. Any company with this large of an audience can build a decent ad business, but particularly attractive about Machinima is the idea of unleashing gamers to make their own videos to promote certain brands, DeBevoise says. He expects the company to become profitable this year.

In the cold-war between Silicon Valley and LA, LA may finally have a big winner.

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Crunchbase

OverviewMachinima.com is an online entertainment network that features clips and teasers from numerous video games. The site allows users to watch trailers, gameplay, montages, music videos and original machinima series and movies.

OverviewSince 1999, the Redpoint team has been partnering with visionary founders to create new markets and redefine existing ones. We invest in startups across the seed, early and growth phases. We have backed over 434 companies with 136 IPOs and M+As, including trailblazers 2U, HomeAway, Heroku, Netflix, PureStorage, Twilio and Zendesk. Our entrepreneur in residence program has incubated disruptors like …